Dhaka, Bangladesh (BBN)– Former Governor of the Bangladesh Bank (BB) Dr. Atiur Rahman on Tuesday said that markets may have hands but not soul.
The former governor was addressing a panel discussion on ‘Sustainable Finance in Developing Countries’ in Dubai, organized by the UNEP and the UAE.
This panel discussion was a part of Global Round Table on Sustainable Finance which was opened by Dr. Thani Al Zeyoudi, UAE Minister of Climate Change and Environment in presence of Governor Mubarak Mansouri of UAE central bank, former Malaysian Governor Dr. Zeti Akhter Aziz and about five hundred delegates, according to a message, received in Dhaka from Dubai.
Dr. Rahman mentioned that financial system in developing countries is overwhelmingly bank-based which has to be nudged beyond its short-term lending and to serve medium and long-term goals of sustainable development.
“This requires that finance reaches the real economy and the base of the pyramid to deliver prosperity for all, poverty for none and respect for mother nature. Financial system or market alone left to itself cannot bridge these gaps,” the former governor explained.
Fortunately, Bangladesh has taken proactive move to reform its financial system to cater to the needs of the real economy, particularly at the lower end.
The central bank of Bangladesh was able to come out of narrow role and became developmental in its orientation to channel funds to un-served and under-served sectors including agriculture, SME and green enterprises, according to Dr. Rahman.
He also said this socially responsible financing ethos was ingrained in the mindset of the CEOs (chief executive officers) of financial institutions early on.
The banks responded positively to the incentives given by the central bank in the forms of refinancing, better rating and awards for their desired performance in innovative finances, the former governor observed. “The experimentation, implementation and improvement in regulations went hand in hand.”
He also said: “In the midst of rapid urbanization and industrialization green finance became an imperative and Bangladesh’s financial sector embraced this financing strategy very quickly. The outcome has been quite gratifying.”
Around 13 million people benefited from green financing during last half a decade reaching 4.5 million homes with solar panels, besides other initiatives like bio-gas, effluent treatment plants and organic agriculture.
A mixed and context specific approach including refinancing, moral suasion, supervision and awareness building led by the central bank brought this outcome, according to Dr. Rahman.
“Coordination between policy makers, regulators, financial institutions and citizens should further improve to make this campaign of green financing and inclusion a success story of sustainable finance for others to replicate,” he noted.